The Customer Institute is a website designed to provide answers to the most important questions for every business; namely, how is my customer asset doing? Is it getting better or worse? How can I improve it.
This site will be the repository of customer data gathered from sources worldwide.

Saturday, March 28, 2015

Peter Kriss
is a senior research scientist at Medallia and the Director of Research for Vision
Prize has recorded some quantifiable evidence that the customer experience
provides significant performance improvements for companies. He focused the research
on two different companies with different revenue models. One company was involved in a transactional-based business while the other was a subscription-based business.

The
transactional-based business was focused primarily on how frequently the customers
returned and how much was spent each time the customer returned. On the other
hand, the subscription-based business focused on retention. In his research his team controlled for other
factors that might affect repeat purchasers to remove any bias by those factors.

His results
were truly amazing as noted below:

1.For the transaction-based business,
customers who had the best past experiences spent 140% more than those who had the
poorest past experience

2.For the subscription-based business,
members who gave one of the top two experience scores had a 74% chance of
remaining a member for at least another year, whereas those who had the poorest
experience had only 43% chance of being a member a year later. The real difference was that members who gave
the lowest scores were likely to remain a member for a little over year,
compared to the members who gave the highest scores who were likely to remain a
member for another six years.

The bottom
line is obvious because the numbers tell the story. Customers that rated their
experience high were much more profitable and loyal.While these two companies provide only anecdotal
experiences, each presents a great case for considering the metric of customer
experience as a way of measuring customer loyalty while providing increased
profit.

Wednesday, March 11, 2015

Tim Keiningham, global chief strategy officer for Ipsos
Loyalty has developed an interesting statistics regarding loyalty. Many companies rely on the NPS measurement to
define their customer loyalty. However, Mr. Cunningham has some statistics that
seem to provide some serious questions about the NPS measurement of loyalty. In
effect, a report for a client with customers right in a five as loyal with the
NPS criterion. However, more than 90% of the time the same customers had an NPS
loyal score for another brand.

There is an interesting new book titled the wallet. How
location rule which was co-written by Prof. Lerzan Aksoy and Mr. Luke Williams
also of Ipsos. In this new book the
authors give an example regarding a retail grocery chain. The authors note that while 53% of the
customers gave high marks when asked would they would promote the store, only
43% listed the store as their primary shopping location. The authors point out
that 57% of the customers with a solid satisfaction score still prefer
competitors. It was further pointed out that customers often chose to shop
elsewhere due to lower prices and one of the other stores had a location that
was more convenient.

Rather than using the NPS score estimator of loyalty. The
authors offer three performance indicators that may provide a better measure of
loyalty. The authors suggest the following three metrics:

1. 1. Measure the percentage of customers that list
them as their first choice

2. 2 The average number of brands used by the
customer

3. 3. The share of the customer’s wallet captured by
the company.

Dr. Keiningham references another study of a financial
services firm that found 90% of the customers who would indicate they would
promote a brand might not list it as their primary brand in the field.

The bottom line is that customer loyalty identified as a 9
or 10 on the NPS scale may not accurately reflect loyalty according to the
following definition. Many companies
believe loyalty means that their company will be considered first when an
engagement opportunity occurs (the customer will spend his money with the
company because they are loyal). Based
on these statistics, that may not be true.

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